Fragile Reforms: World Bank and Asian Development Bank financing in fragile and conflict-affected situations

Drawing from research into the delivery of five bank-financed projects covering infrastructure and other sectors, this study highlights a range of insights and opportunities to enhance how the World Bank and the Asian Development Bank (ADB) approach project financing in fragile and conflict-affected situations.

The study documents how conflict-sensitive approaches are and are not used by the banks to minimise risks and support local peace and development outcomes, as well as some of the consequences for bank investments and project-affected communities. The study argues that bank strategic commitments create the space for conflict-sensitivity to a degree; and that pockets of technical expertise for conflict-sensitive project financing exist within the banks, but that these capacities are insufficient as the banks prepare to scale up lending in fragile and conflict-affected situations. Specifically, the paper argues that improved capacity for conflict-sensitivity is constrained by political dynamics. In effect, a conflict-sensitive approach to project financing is not automatically adopted in fragile and conflict-affected situations. In instances where conflict-sensitivity is adopted, it can be restricted to project design and may not be applied throughout project cycles.

Recommendations:

Operate responsively: Look beyond the harmonised list of ‘fragile and conflict-affected situations’ when assessing whether or not a country or project requires a conflict-sensitive approach. By relying on a limited set of indicators, the lists exclude the diversity and complexity of conflict and fragility, and how these pose risks in all societies in varying degrees and in different ways at all times. Rather than relying on problematic lists, it is far more effective to engage on the basis of a deep understanding of the unique history, threats, dynamics and vulnerabilities of each operating context.

Monitor closely: Apply conflict-sensitivity continuously, from project preparation to completion, and conduct regular and balanced project oversight to inform risk management and project adaptation. Sustained and close attention to shifting and changing conflict and fragility dynamics from project preparation to project completion and into any phase of additional financing, plus rigorous and balanced oversight and feedback mechanisms, can help to reinforce the conflict-sensitivity of project financing where influential project stakeholders, interest groups or spoilers may be inclined to manipulate projects to progress their own agendas, negatively impacting project outcomes and broader progress towards peace and development.

Engage collaboratively: Secure client government support for conflict-sensitivity from the start, and avoid approving projects where it is not forthcoming. Where political support for conflict-sensitivity is not aligned within the bank structure (from project leader, to country director, to regional and global headquarters senior management) – and/or where alignment between the client government and the bank on conflict-sensitivity is lacking – attempts to conflict-sensitise project financing are unlikely to deliver the intended results. In contrast, where there is alignment between these various actors on the application of a conflict-sensitive approach, the prospects for a successful project that delivers sustained peace and development outcomes are more encouraging.

Summary